Yum! Brands Inc. (YUM – Analyst Report) has been uninterruptedly following its cash deployment strategy through dividend payments and share buybacks. Following the trend, the board of directors recently authorized share repurchases of up to $750 million in additional shares of common stock. The company also announced a dividend of 37 cents per share.
Subject to market conditions, these buybacks can be made from time to time in the open market or via privately negotiated transactions. This additional share buyback is authorized through May 31, 2015. To date, the company has bought back $708 million shares at an average price of $68. In Nov 2012, the board had last authorized a repurchase of up to $1 billion in additional shares of common stock through May 31, 2014.
The quarterly dividend of 37 cents will be paid on Feb 7, 2014 to shareholders of record at the close of business on Jan 17, 2014. The company has increased its dividend at a double-digit percentage rate over the past nine years, since it began distributing dividends. The last double-digit percentage rate increase of 10.0% was announced in Sep 2013. Prior to that, the company hiked its dividend by 18% in Sep 2012.
Yum! Brands continues to take initiatives that would keep the stock attractive for investors while maintaining its price. The company recently announced a complete restructuring of its business divisions. This comes in the wake of disappointing financial results for the past few quarters due to weak performance in its China division. China, which once played a pivotal role in the company’s growth story, began to falter after fourth-quarter 2012 due to bad publicity resulting from a quality issue. Given the poor performance of KFC China in September, Yum! now expects China comps to decline further in the fourth quarter.
Even though the Zacks Rank #4 (Sell) company has undertaken quality assurance measures, marketing campaigns and various promotional offers, it will take some time to recover completely. Further, all these initiatives will likely result in incremental expenses that will weigh on the bottom line.
Some better-ranked stocks in the industry include Buffalo Wild Wings Inc. (BWLD –Analyst Report), Bob Evans Farms, Inc. (BOBE – Snapshot Report) and Burger King Worldwide, Inc. (BKW – Analyst Report). While Buffalo Wild Wings holds a Zacks Rank #1 (Strong Buy), Bob Evans and Burger King hold a Zacks Rank #2 (Buy).